The Michael Fuljenz Metals Market Report: April 2013, Week 2 Edition

Gold recovered strongly last Friday on the weak jobs report, on the theory that a slower recovery will dampen the stock market and lift gold as an alternative investment. Last Thursday, gold closed at a 10-month low of $1546 in London, before gaining over $30 on Friday. As usual, The Wall Street Journal and other mainstream media wrote premature obituaries for gold at its low point last Thursday. They should have been watching gold in terms of the euro and yen, in which gold has risen in recent weeks.

Guns and Gold 142nd NRA Annual Meeting and Exhibits May 3-5

The 142nd NRA Annual Meeting and Exhibits, May 3 - 5, is being held at the George R. Brown Convention Center in Houston, Texas. This year's NRA show will feature over 550 exhibitors, covering more than 400,000 square feet of convention center space. Be sure to stop by booth #4616 to see us. One lucky visitor will win a Guns & Gold commemorative 1871 Colt revolver with a historic 1871-dated U.S. Quarter Eagle gold coin in the grip. See you at the show! Call your account representative for more details.

The Wall Street Journal Writes a Premature Obituary for Gold

In the Friday morning (April 5, 2013) edition of The Wall Street Journal, an article entitled "Golden Moment Wanes for Investors" cited all the bearish opinion about gold on Wall Street, saying "Thursday's fall was the latest evidence that investors have lost in faith in gold." The article quoted many gold bears, many of whom cited the lack of demand for gold ETFs as a factor in gold's recent decline, but U.S. buying has little to do with gold's price, since North America is responsible for just 7% of global demand.

The article also ignored the physical demand for metals, which is rising. Even though the physical metal held by ETFs rises and falls with demand for those paper shares, those who buy and store the physical metals are "strong hands," investors who do not panic and sell when the momentum temporarily changes. The physical market is much tighter this year than in recent years. In January, the U.S. Mint postponed the filling of orders for Silver Eagles for several weeks, causing premiums to rise, and now we just heard that there is another three-week backlog from the U.S. Mint on Silver Eagles and premiums are rising again!

"In God We Trust" On Money Under Attack Again

Last month, the "Freedom from Religion Foundation" and 19 other plaintiffs sued the U.S. Treasury to take "In God We Trust" off of the nation's coins and currency, since it represents "discrimination" against non-believers. By handing their money to anyone in a commercial exchange, the plaintiffs argue, they are "forced to proselytize - by an act of Congress - for a deity they don't believe in." A similar case in 2011 reached all the way to the Supreme Court, where it was rejected.

For a complete review of the history of "In God We Trust" on U.S. coinage and currency, see my award-winning website article devoted to that subject, www.InGodWeTrustOnMoney.com.

Is President Obama Giving Major Donors a "Free Pass" in the Gun Control Debate?

Last week, Campbell Brown, former news anchor at CNN and NBC, wrote in The Wall Street Journal that President Obama is giving Hollywood and other major Democratic Party donors a "free pass" in the gun control debate by putting all the onus on gun owners and not on the "culture of violence" saturating movies, TV, video games and related electronic media products. She quoted Dr. Victor Strasberger, the leading researcher on media violence for the American Academy of Pediatrics, who said, "All our studies show portraying violence is extremely dangerous...This can and does lead to violence."

The President's gun control study group, headed by Vice President Joe Biden, only meets with supporters of the industry, she says, avoiding anyone critical of the entertainment industry. The President's panel has ignored the American Academy of Pediatrics, which says: "The evidence is now clear and convincing: media violence is one of the causal factors of real-life violence and aggression." Neither did they listen to the American Medical Association, which cites "a clear link between brief exposure to violence on TV or movies and increases in aggressive and even physically violent behavior in young persons."

The President is revered in Hollywood, whose leaders favor gun control for law-abiding Americans, while minimizing the role of violence in their products. According to the Center for Responsive Politics, almost one third of the $1 million-plus donors to the president's Super PAC are entertainment and media leaders. It's no wonder that the President gives Hollywood a free pass, but it would be fair to all Americans if the President stood on principle, not politics, by putting some "skin in the game" by challenging Hollywood to clean up its act. "Mr. Obama is particularly well positioned to challenge Hollywood because of his special relationship with the media world's elites," said Campbell Brown. "They might be more likely to heed criticism coming from Mr. Obama than from any other president or member of Congress." AMEN!

Gold Is Down Because the Dollar Is Up...to the Euro and Yen

The three major currencies in the world today are the U.S. dollar, the euro and the Japanese yen. Those are the only currencies printed in enough volume to finance the bulk of international trade, so they make up the majority of the foreign reserves in central banks. But the euro is eroding due to continual crises in countries like Greece, Spain, Italy, Portugal and now Cyprus, and Japan's yen is falling the fastest of the three, due to a concentrated effort by the Japanese government to fuel inflation to boost their economy.

Last Thursday, the Bank of Japan announced a round of "quantitative easing" (QE) of prodigious proportions - adding $1.4 trillion to the Japanese economy over the next two years. Per capita, this is much more accommodative than the Fed's $85 billion per month, which amounts to $1.02 trillion per year or $2.04 over the next two years. Japan's economy is only about one-third the size of the U.S. economy and Japan has 62% fewer people (128 million vs. 335 million) so the per capita monetary easing in Japan is much more dramatic than here. In fact, Bank of Japan Governor Haruhiko Kuroda called last week's announcement "an unprecedented degree of monetary easing." Immediately after the news came out, Japan's stock index surged 2% higher and the yen dropped 3% against the euro and the U.S. dollar.

This is a dangerous amount of easing, like a drug addict upping the dose to life-threatening levels. This amounts to more than doubling Japan's monetary base within just two years. If you water-down any nation's paper currency that rapidly, a siege of inflation is virtually guaranteed, but that is what the Japanese people want, after suffering through the last 23 years of gradual deflation in their economy.

The noted hedge-fund manager George Soros said, "If the yen starts to fall, which it has done, and people in Japan realize that it is liable to continue...then the fall may become an avalanche." The demand for gold is already rising in Europe and Japan, since the price of gold is rising in Japan and stable in Europe.

In the last two months, the euro has fallen roughly 5%, from $1.37 to $1.30, while the Japanese yen has fallen roughly 10%, from 1.12 cents per dollar to 1.01 cents. While gold has fallen about $100 in the last two months, from $1675 to $1575, gold has risen in the Japanese yen and been roughly flat in euro terms.

That's why it is so short-sighted and provincial for American investors and the mainstream press to keep harping about gold's recent under-performance. They are only looking at the price of gold in dollar terms. They are ignoring the fact that gold can suddenly rally after any sort of financial or geopolitical crisis - like another "Cyprus" domino falling in Europe, or a North Korean missile firing. Any such crisis could cause gold to rise $100 or more in a matter of days. We are one crisis away from another huge gold rally.

Metals Market Report Archive >